Sourcing Contract under Countervailing Incentives

• 成果类型: Article
• 署名作者: Gan, Xianghua; Feng, Qi; Sethie, Suresh P.
• 署名单位: Southwestern University of Finance & Economics - China; Purdue University System; Purdue University; University of Texas System; University of Texas Dallas
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13057
• 发表日期: 2019
• 页码: 2486-2499
• 关键词: supply contract; adverse selection; Supply Chain Efficiency; type-dependent reservation profit; Countervailing incentives

摘要

We study a retailer's sourcing contract when the supplier's reservation profit (offered by his outside options) depends on his cost, which is privately known to only the supplier. An interesting discovery from our analysis is that supply chain coordination may be achieved despite the information asymmetry between the two firms regarding the supplier's type (i.e., his cost). This happens when the marginal contribution of the supplier's cost efficiency to the trade matches with the supplier's marginal reservation profit. In this case, the optimal contract quantities maximize the supply chain profits for the respective supplier types, and no information rent is paid to any supplier type. For the general case, we show that, regardless of his type, the supplier may have an incentive to overstate or understate his cost, depending on whether or not his marginal contribution to the trade exceeds his marginal reservation profit. We demonstrate six possible forms of the optimal contract. Observations from our analysis contrast with those derived from previous studies, complementing the theory of countervailing incentives.